Competition Moves Society Forward

Football season is in full swing, and nowhere else can one find a better demonstration
of fierce competition, the glory of victory or the agony of defeat. All too
often, though, we forget that these customs so often left to burly beer drinkers
and couch potatoes truly express facets of everyday life.

There is a telling quote from the ancient Roman poet Ovid which translates
roughly into "a horse never runs so fast as when he has other forces to catch
up and outpace."

While sports clearly illustrate the purity of rivalry and reward for the bold,
we sometimes need reminding that the concept of competition is not confined
to the playing field. It is an ever-present facet of life and a driving force
behind progress, and should be appreciated as such.

Whether a long-standing champion boxer with no skilled challengers left to
ward off or a powerful and reclusive Wall Street CEO with a cast of yes-men,
examples abound of laziness and ineptitude that are bread from a lack of competition.

This is particularly relevant today as the federal government prepares to
sell stock of General Motors back to the public. Many will recall that GM rival
Ford declined a government bailout after the crash of 2008. Instead, Ford did
what any competitor would do: hunker down, cut costs, narrow product lines,
shrink payrolls, close facilities, and make every dollar count.

Now, though GM has done some downsizing, Ford is much more financial sound
while its larger rival has failed to patch all the holes in its balance sheet
and has lost market share. One can only hope that GM's sale to private investors
will increase pressure to shape up and fight to regain prominence.

The business world is froth with examples of fierce competition and bitter
rivalry. One frequently studied in business school is that of Jack Welch and
his tenure as General Electric CEO. Welch used a method known as 20-70-10.
Each year he ranked his managers; the top 20% were groomed for upper management,
the middle 70% were kept in their current roles and motivated, though not considered "rising
stars." Those managers in the bottom 10% were fired.

Competition can, unfortunately, also be restrained, especially by government
intervention. When the government attempts to guide production or the allocation
of resources, progress slows. As was the case with the birth of the cell phones
and computers, and the auto industry before them, industries grow the fastest
when they are in their infancy - BEFORE the government gets involved to regulate.

For more perspective on the government's role in the economy and its impact,
readers with enjoy F.A. Hayek's The Road to Serfdom. Written in the
early 1940s by an economist living in England, the book is an interesting study
socialist and totalitarian governments (an important issue during World War
II) of what was then termed "economic planning."

The fact is that, as is the case with the private sector, competition also
serves to drive sound (and popular) policymaking and efficient government.
Partisan politics force parties to compete for supporters and use their times
in power for the benefit of constituents, while those entrenched in power become
inefficient and detached.

Such is the case with the US Transportation Security Administration, as illustrated
by recent headlines. The TSA, with no apparent competitor to challenge its
existence, much less its expansion, has no limitations when it comes to restricting
personal rights or invading their privacy. It has no need to ensure contentment
among travelers it shepherds.

Meanwhile there are towns like Sandy Springs, Georgia, whose services and
agencies hardly extend beyond police and firefighting. Run by a city manager,
Sandy Springs takes advantage of competition by outsourcing nearly all of its
services to private companies.

With companies competing for contracts to provide such services, the citizens
of Sandy Springs apparently feel that their needs to met with the minimum necessary
cost; much more efficiently than could be done with an expanded payroll. It
seems Sandy Springs residents posed themselves the question: What can the government
do better than the private sector? Their list was rather short.

Competition, though enjoyable on a Sunday afternoon, is a pervasive aspect
of life, particularly among western cultures. History has shown it to be the
lifeblood of innovation and the driving force behind progress. We can only
pray that our leaders learn that sooner or later - preferably sooner than later.

Dock David Treece is a partner with Treece Investment Advisory Corp (www.TreeceInvestments.com)
and is licensed with FINRA through Treece Financial Services Corp. He provides
expert content to numerous media outlets. The above information is the express
opinion of Dock David Treece and should not be construed as investment advice
or used without outside verification.